Governor Shaktikanta Das on Tuesday issued a warning against the proliferation of lending apps and their usurious recovery pricing, saying that the Reserve Bank is not interested in punishing operators or inhibiting innovation but rather wants them to play by the rules.
Speaking this evening at the third global fintech summit, he stated that the central bank’s goal is to make sure that everyone abides by the rules of the road rather than to punish or stifle anyone.
The statement gains significance in light of recent incidents in which a few borrowers through these apps were compelled to commit suicide, as well as the incident last week in which a young pregnant woman was run over by Mahindra Finance recovery agents in Bihar, who had funded her father’s tractor.
The central bank has made numerous regulation adjustments since the negative loan app instances first came to light two years ago, including requiring loan applications to clearly state which NBFC or bank is paying for the money up front.
Our objective is not to penalise anyone or restrict anyone else’s activity, the governor responded when asked why the RBI has not included the first loss default guarantee in the recently adopted rules for the lending apps. Mr. Das stated that all we are asking is that you observe the driving laws.
Digital lending will continue to receive support from and support from the Reserve Bank. If you just move ahead one step, we’ll move forward two steps to talk with you. Having said that, these innovations also need to be responsible and should improve the financial system’s efficiency and resilience while also helping the customer.
“Robust internal product and service assurance framework together with fair and transparent governance will go a long way to safeguard the interest of customers and ensure long-term sustainability of fintech entities themselves,” Mr Das said.